Government’s Role in Our Economy and Lives: Your Weekend Reading

July 27th, 2012 at 6:02 pm

I have a remarkable and timely document to share with you, but there’s a condition: you must agree to give it as close a read as you can over the weekend. And if you happen to be a public official, then you must agree to read every word and report back on Monday.

Agreed?

OK, here you go. It’s an historical review by the Federal Reserve Bank of Boston and the role that government has played in key areas of our economy and society.

It’s a balanced look—the Boston Fed would not be confused with a Marxist junta. What I like about it is that we don’t always recognize the historical role that government has played in so much of what’s important to us. Starting with a Boston light house that the British blew up in 1776, later to be rebuilt by the MA legislature, through ARPANET to the Internet, with stops at the safety net, education, infrastructure, workplace safety, consumer protection, racial equality and more, the report provides a gentle reminder of the potential damage of today’s deep anti-government sentiments.

Obviously, all of these areas remain works in progress, but as economist Paul Samuelson puts it, echoing a persistent theme here at OTE:

“Government provides certain indispensible public services without which community life would be unthinkable and which by their nature cannot appropriately be left to private enterprises.”

And the connections aren’t always obvious. For example:

In 1815, when Congress established national armories in Springfield (MA) and Harpers Ferry (VA), its primary purpose was to promote production of military firearms with standardized, interchangeable parts. But the infusion of government money had a much broader impact, particularly in the area surrounding the Springfield Armory, where skilled gunsmiths, mechanics, and machinists exchanged ideas and sometimes established factories and machine shops of their own, using the techniques they perfected while working at the armory.

By mid-century, “armory methods could be found in factories making sewing machines, pocket watches, padlocks, railway equipment, shoes, wagons, and hand tools. And the key transmitters of these methods were New England machine-tool firms closely connected with the Springfield Armory.”

Even a cursory glance at the history of American innovation shows this dynamic at work through the present (fracking is a recent example).

I introduced this as a “timely” document. I was thinking not simply of the Tea Party and their disparagment of government’s role—though research on their views finds that when it comes down to cases, like cutting Medicare, they’re not so sure. I was also thinking of the presidential debate we’re having, where Gov Romney consistently espouses a much diminished role for government compared to the President.

For example, our analysis shows that under Gov Romney’s proposals, including a massive tax cut and a balanced budget requirement, government programs outside of defense and Social Security would have to be cut 59% or $9.6 trillion by 2022. It should be quite clear that such a radical reformulation of government’s role in our economy and our lives would preclude the investments and social protections documented in the Boston Fed’s report.

So give this a read over the weekend and let me know what you think. I found it to be a useful reminder of a fundamental point that we’re in danger of forgetting.

(H/t: IDG.)

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5 comments in reply to "Government’s Role in Our Economy and Lives: Your Weekend Reading"

I am not sure that fracking is bad in and of itself, the fact that the regulations on it are so lax is more the problem. It has opened up a lot more natural gas that just a few years ago was planned to be running out by now. Mind you it is not a solution for the long term but sure is a way for us to get a bridge to new renewable resources.
Mick

“It also worked with the U.S. Treasury Department to coordinate the Troubled Asset Relief Program (TARP) and continued to conduct
“stress tests” to evaluate whether or not the largest U.S.
bank holding companies “continue to meet supervisory
expectations for capital adequacy.”

I believe this has been one of most misleading deeds our government has done. Yes, things might of been worst financially for the Nation, but besides banks getting bigger, how did it help the everyday Joe?

The one thing that increased the distrust f the government might have come from the TARP Act and seeing little to no relief for many losing their homes, or having home underwater!